The common stock of Conagra Brands, Inc. (CAG) has been trading in a narrow range around...

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The common stock of Conagra Brands, Inc. (CAG) has been trading in a narrow range around $34 per share for months, and you believe that there is a good chance that there will be volatility in the stock for the next three months. The price of a three-month put option with an exercise price of $34 is $0.35, and a call with the same expiration date and exercise price sells for $0.48. (a) What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? How much would you have to pay to purchase this strategy? [4 Points] (b) How far must the stock price move in either direction before you earn a profit? What is the maximum possible loss you can suffer from this strategy? [10 Points] The common stock of Conagra Brands, Inc. (CAG) has been trading in a narrow range around $34 per share for months, and you believe that there is a good chance that there will be volatility in the stock for the next three months. The price of a three-month put option with an exercise price of $34 is $0.35, and a call with the same expiration date and exercise price sells for $0.48. (a) What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? How much would you have to pay to purchase this strategy? [4 Points] (b) How far must the stock price move in either direction before you earn a profit? What is the maximum possible loss you can suffer from this strategy? [10 Points]

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Call option A call option is a contract that gives the buyer of the option a right to buy specified ... View the full answer